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TNPA welcomes multiyear ports tariff methodology

TNPA welcomes multiyear ports tariff methodology

Photo by Duane Daws

19th September 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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The Transnet National Ports Authority (TNPA) welcomed the Ports Regulator of South Africa’s decision to switch to a multiyear tariff methodology, TNPA CFO Mohammed Abdul said on Friday, stating that a lack of certainty in prior years had negatively affected TNPA’s capital expenditure (capex).

Speaking at the Johannesburg session of the 2015/16 port tariff application roadshow, he explained that Transnet’s overall Market Demand Strategy (MDS) detailed aggressive capital projects, with TNPA being responsible for R42.7-billion of the total R312.2-billion MDS expenditure.

He noted that, in terms of the MDS, TNPA planned to spend R3.58-billion in the 2015/16 financial year and R4.6-billion and R9-billion in the 2016/17 and 2017/18 financial years respectively.

Abdul stated that these capital projects had to be funded; however, the absence of a clear future methodology, not knowing what direction future tariffs would take, had put TNPA in a difficult position in the past in terms of planning for future capex.

“[Therefore], the approval by the regulator’s office of a tariff methodology for the next three years on a multiyear basis certainly brings much-needed certainty to the process,” he added.

MULTIYEAR METHODOLOGY
Also speaking at the roadshow, Ports Regulator CEO Mahesh Fakir explained that the multiyear tariff methodology, while retaining the fundamental elements of previous determinations, would be applicable to the 2015/16, 2016/17 and 2017/18 tariff years, as opposed to only one year, improving the level of transparency and consistency in the tariff setting process.

While a single methodology would be used for the entire period, the multiyear tariff application would have different calculations for each tariff year in the period, consisting of forecasts and calculations of each of the components of the required revenue approach.

“The guidelines within the regulatory manual for the tariff years 2015/16 to 2017/18 will assist the TNPA in submitting an application that will reduce regulatory uncertainty by narrowing the difference between what is requested by the TNPA and subsequently granted by the regulator,” the regulator said in its tariff methodology document.

The regulator would, however, allow for the yearly review and adjustment of tariffs within the three-year period, as opposed to fixing the prices for the period, as this would protect users from possible large step changes in the tariff.

In terms of this methodology, the TNPA subsequently applied for a 9.47% tariff increase for the 2015/16 financial year, TNPA head of tariffs Sanjay Govan said.

Abdul stated that, while the 9.47% tariff increase request was seemingly high, this was necessary if the beneficiation of goods and the export of beneficiated goods, was to be promoted.

Govan noted that, in line with the principles of TNPA’s proposed pricing strategy, that would differentiate between the export and import tariffs to support the development of the industrial sector with a specific focus on value-adding activities, the authority proposed that the tariff adjustment be differentiated.

This differentiation would comprise an 8.5% increase in cargo dues for the export of full containers, an 8.5% increase in cargo dues for motor vehicles exported on own wheels, and a 9.6% increase in all other marine tariff categories and cargo dues.

The indicative tariff increases for the 2016/17 and the 2017/18 financial years were proposed at 15.91% and 6.49% respectively.

Public comments on the tariff application had to be submitted to the regulator by September 26, after which the regulator would set the approved tariff for 2016/17 and publish the indicative tariffs for 2017/18. 

NEW STRATEGY
Meanwhile, Fakir also noted that the regulator was collaborating with TNPA in a process aimed at finalising the new ports tariff strategy, as mentioned by Govan, by the end of the current financial year.

He explained that the pricing tariff strategy currently mostly considered the total cost, without focusing on who was paying for what.

“The pricing tariff strategy, in some cases needs to be rebalanced. How the share of the payment of infrastructure is fair or not is an important part of the new strategy,” he said.

Fakir noted that, once finalised, the new strategy would be implemented in a phased manner and was expected to start influencing port tariffs from the 2016/17 financial year onwards.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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